Week ending 1 May 2020
Against the backdrop of the Covid-19 crisis and a country on lockdown, TPR has published its annual funding statement for schemes with a valuation date between 22 September 2019 and 21 September 2020. The Regulator recognises that March/April 2020 valuations will be particularly challenging. Many trustees will not have sufficient information to form a reliable view on their employer’s covenant and affordability at the present time, nor on the expected future level of long-term returns from their scheme’s assets. TPR suggests that trustees could consider delaying decisions about key assumptions until they have more clarity, but instead look initially at a range of different scenarios.
The 10 tables showing the key risks and actions to take, which reflect the sponsor’s covenant strength, the maturity of the scheme’s liabilities and the strength of the existing technical provisions and recovery plan, have not changed from the 2019 statement. Of course, the covenant of the sponsor may well have deteriorated over the past year. The Regulator warns trustees to be particularly vigilant of employer covenant leakage.
TPR also notes that the second consultation on its new DB funding code will be delayed until 2021.
TPR has also published guidance on communicating with members, with a view to helping them avoid making hasty decisions at this uncertain time. A template letter has been provided for trustees to send to DB members who are considering a transfer out. This warns the member that it is unlikely to be in their best interests to transfer. The letter is jointly signed by the Regulator, the Financial Conduct Authority and the Money and Pensions Service. The guidance also covers members stopping contributions, pension scams and DC investment market volatility.
Just Group has agreed three pensioner buy-ins with two schemes totalling £226 million. The largest buy-in was for £160 million with the Leonardo Electronics Pension Scheme and was completed in March 2020. The other two deals (£49 million and £17 million) were for the NG Bailey pension scheme.
In the news this week, the DWP confirms its determination to bring about DC consolidation of smaller schemes, the Regulator ends more of its Covid-19 easements and the Court of Appeal rejects the claim that increases in the state pension age of women born in the 1950s was discriminatory.
Journey plans or glide paths may have been around for a long time but they’re at the heart of the Regulator’s proposed new funding code. In this Pensions Perspective, Leonard Bowman looks at how long-term funding and investment plans are evolving and explains why companies are increasingly taking the lead in designing an endgame strategy for their schemes.
This quarter’s Arena has a summary of our recent Pensions Perspective, “Emerging from lockdown”, which looked at how best to tackle the most common pension issues which companies are currently facing. It also shows all the usual financial and investment analysis for the quarter ending 30 June 2020.
As we keep hearing, we are living in unprecedented times. However, as we turn our attention to the future, what does the “new normal” mean for defined benefit pension schemes? In this Pensions Perspective, Leonard Bowman considers the most common pension issues that companies are facing and how best to ensure that the company approaches these on the front foot.
Covid-19 has created many challenges for DB schemes but, for those ready to transact in 2020, it may have created even more favourable market conditions for a buyout. The problem is that most schemes are not there yet. In this Briefing we look at what being “deal ready” actually means and what work it will involve.
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